Sunday, 30 December 2012

"There is no central authority". Review of After Capitalism. Part 3.1

So what,
then, is the alternative? So far I have examined, dispassionately I hope, the
flaws in capitalism as well as its attractions. Schweickart’s fundamental claim
– the point of After Capitalism – is
that TINA is a self-imposed intellectual constraint. There is a feasible alternative, a different economic system that
substantially reduces or eliminates capitalism’s flaws without replacing them
with more virulent pathologies.

This is not
a magical transformation, an instant gateway into nirvana. Problems will not
miraculously disappear, says Schweickart, “but intractable problems will become
tractable”.

He calls
this alternative model “Economic Democracy”, which I will refer to as ED for
short. Wage labour will be abolished for most enterprises (small businesses
like restaurants will be excluded). Most enterprises will be run democratically
through one member, one vote and general assemblies of all employees. This is
in contrast to the hierarchical, capitalist manner in which employees are hired
and are simply tools of production.

“When you join [a firm under ED] you receive the rights of
full citizenship; you are granted an equal voice, namely, an equal vote in the
community,” writes Schweickart. And you get an equal share of the profits made.

Some form of economic democracy,
as an alternative to capitalism, has attracted a growing number of advocates
recently, including Richard Wolff, Dan Hind, and even Lenin’s Tomb
blogger and SWP member, Richard Seymour.

This is not what has traditionally
been thought of as socialism. There is no central planning or state control of
the commanding heights of the economy in Schweickart’s conception of economic
democracy, though he still describes it as socialism. “Economic democracy is a
decentralized market economy,” writes Schweickart. “There is no central
authority dictating consumption, production or employment.”

If anything, ED is reminiscent of
syndicalism, which had its heyday
before the First World War.

In many ways, ED is rapidly
crystallising into the post-Communist and post-social democracy alternative to
dysfunctional capitalism. So in analysing and criticising Schweickart’s ED
model, I’m also looking at this larger trend.

The best
way to do this is to revisit the flaws of capitalism, outlined in parts 2.1 and
2.2 and see how, if at all, economic democracy will remedy them. And them to
look at the question of markets. Can a non-capitalist market work? Is this
really a cure for capitalism, or just capitalism in another form?

1 Inequality

Inequality
is an intractable problem of capitalism. It is acute and worsening. Schweickart’s ED seems to attack
this problem at source and very effectively. The Mondragon collective of
co-operatives in Northern Spain, which
Schweickart repeatedly cites and says is of “world historical” importance, has
a rule that the pay ratio between the highest and lowest paid, should not exceed 6.5-1. By
comparison, the pay ratio in Anglo-Saxon corporations is, on average, more than
300-1.

It is
possible that scarcity of certain skills and the cultural influence of senior
managers, which in grossly magnified in current society, could expand that
ratio even under system of economic democracy. But, as a remedy for inequality,
ED is far more persuasive than currently touted “solutions” such as a high pay
commission and workers represented on remuneration committees.

Cure for Capitalism rating: 8 out of 10

2 Lack of meaningful democracy

Schweickart
says that, under capitalism, we live in polyarchies.There are free elections and a choice of candidates, but not
real democracy.

ED would
fairly obviously enhance and render meaningful democracy, because it would be
applied to the one huge area where it is commonly now banished: the work-place.
When a person joins an enterprise under ED, they become a citizen not merely an
employee.

The
democratic advantage of ED over central planning socialism is that it is
decentralised. Employment is not monopolised by one entity, the state, with
lethal consequences for democracy and freedom of expression.

But
Schweickart also advocates social control of investment. The destination for
new investment, 10 to 15% of GDP, would not be decided by banks, stock markets or boards
of directors, but by public meetings, open to everybody. This democratic
control of investment plays a similar role that participating budgetingdoes for public spending. In this
way, the public would be able to influence the pattern of consumption and the
way society develops, beyond the limited and skewed capitalist of way just
voting with their feet or wallets.

Another
democratic enhancement of ED is that, because huge profits do not accrue to
small minorities of wealthy people and large corporations, the political system
would not be perverted by the influence of money. Against this, it should be
remembered that even worker-directed firms have interests which may conflict
with those of the wider community. The “red priest”, José María Arizmendiarrieta, who founded the
Mondragon co-op movement, warned of the danger of co-operatives becoming
“collective egoists” (which Schweickart quotes in After Capitalism). So the problem of lobbying and the pursuit of
institutional selfishness are not banished by ED.

Also, ED does not
affect wider political decisions and how these are made. ED enshrines direct
democracy in the realm of the enterprise where people spend their working
lives. But, by definition, it is silent about the wider political realm.

Cure for Capitalism rating: 6.5/10

3 Environmental degradation

The environmental
flaw in capitalism is that it grows, exhausting natural resources and causing
poisonous side-effects of production, such as carbon emissions. At first
glance, it is difficult to see how ED would be any different. Enterprises
would, as Schweickart freely concedes, compete for market share and to satisfy
their consumers. The difference, he argues, is that worker directed enterprises do not have the
same growth dynamic as their capitalist counterparts. A capitalist company
exists to maximise profit, but an economic democracy enterprise exists to
secure profit per worker. As result ED enterprises are less likely to seek
growth because profit will have to be shared among a growing work-force. A bog standard
capitalist company does not have the same internal limit to growth because
workers are merely a tool of production, and do not receive profits.

As a
consequence, ED firms are compatible with low or zero growth, says Schweickart.

The other
way in that ED is less harmful to the environment is that new investment is
more geographically spread out. Money for new investment is generated by a tax
on all enterprises, which is distributed to regions on a per head basis, a
method Schweickart calls “social control of investment”. At present, capital
and thus jobs, concentrate in certain areas (such as London
in the UK) creating mega-cities and putting
an intolerable strain on the surrounding environment. The same damaging
concentration of people and resources would not occur under ED.

I can see
Schweickart’s arguments but I’m not completely convinced that ED enterprises
would so readily eschew growth. I have to conclude, with regard to
environmental degradation, case unproven. For example, it has been argued by
another economic democracy advocate, Richard Wolff, that worker self-directed
enterprises would not pollute because the workers would suffer from the results
and they won’t want to harm themselves or their families. But what about
pollution, such as carbon emissions, whose effects may be felt on the other
side of the world? It’s also apparent that enterprises in a market seek growth,
not just to maximise profit, but also to head off competition and protect
market share. This condition applies to worker directed enterprises, as much as
their capitalist equivalents.

Cure for Capitalism rating: 5.5/10

4 Unemployment

This is a
distinctly mixed picture. Under ED there is no desire or need for unemployment
to discipline the workforce, no requirement for a reserve army of the
unemployed. If anything, the opposite is true. A prime aim, says Schweickart,
of ED is the creation of employment, whereas under capitalism, it is merely a
by-product. Job creation is an explicit goal of the Mondragon collective of
cooperatives in the Basque country, which Schweickart believes, demonstrates
how a non-capitalist economy can work.

In fact,
says Schweickart, there is an intrinsic bias against employment in capitalism.
Capitalist enterprises are more inclined to replace workers with machines
(partly because payroll taxes fall on each individual worker, whereas under ED
they would be replaced with an enterprise tax) in order to maximise profit. ED
enterprises, more dedicated to securing durable employment, would be less prone
to mechanisation. But this in itself creates a looming problem. Because ED
enterprises aim to create employment, they would be more likely to not develop
or even suppress technologies that render labour redundant. In this way society
would artificially hold back the development of technology for the sake of
preserving paid jobs.

Not only is
this, like King Canute trying to hold back the tide, impossible, it tries to
defer facing how society is going to deal with the fact that in the future
there will simply be less demand for labour because of the advance of
technology. We can’t all, nor should we, all have 5 day a week jobs. In 1930,
John Maynard Keynes believed that in a century’ time, people would work 15 hour weeks. Schweickart simply does not deal with this issue and I believe it is a
major lacuna in his alternative model. The absence of a central authority, or a
corrective to the free workings of markets, just incubates a vast problem.

In short,
ED does deal with the problem of capitalist unemployment but in a way that
generates problems of its own.

Cure for Capitalism rating: 5/10

I realise
this is already quite long. So, for those that are following this saga, I will
write the final part soon and examine whether ED can eradicate capitalist instability
and overwork. And then consider the broader question of markets.

I was going
to include a clip of Schweickart speaking but I’ve run out, so this will have
to do.

1 comment:

As a stop-gap measure, Schwikert's ideas may have thier limited value (though the undesirable elements of any system tend to be the most flexible elements of that system, and adapt most rapidly to any new regime). Ultimately, the only solution worthy of the name is one that addresses the fact that most production is unnecessary and socialoly useless.

About Me

Capitalism is not beautiful, said John Maynard Keynes. It is not intelligent, it is not virtuous and it not just. “But when we wonder what to put in its place, we are extremely perplexed.”
This blog is about the ideologies that mask the ugliness and injustice beneath the surface. And how our perplexity might be diminished.
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